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Firms explicitly state they have no clear-cut emissions trading strategy

Posted by gmarkets on 27 September, 2007

Up to this point, findings give the impression that many firms are responding strategically by getting involved in emissions trading schemes, according to Pinkse, J. and Kolk, A. in the article ‘Multinational Corporations and Emissions Trading’ in European Management Journal (2007).

No major trend in strategic trading approach: However, this disregards the fact that still more firms have not responded to emissions trading schemes at all. Many firms explicitly state that they have no clear-cut emis­sions trading strategy, of which some add that they have no intention to develop one either. A consider­able number, however, is considering to develop an emissions trading strategy, but have not yet substan­tiated this claim. These two categories are not mutu­ally exclusive though, as there are large corporations that have no plan to start emissions trading but nevertheless monitor international developments. This makes sense because once a trading scheme is implemented in the form of a public institution, firms cannot get round participation.

For some no strategy is no problem; outside of EU reach: The reason why so many large corporations do not feel the need to become engaged in emissions trading is because it is simply not relevant to their business operations. We examined a broad sample, which includes many companies that do not have energy-intensive activi­ties. However, the fifty-six companies that explicitly maintain not having a strategy also include major energy users. They can uphold this position on emis­sions trading, because as a result of their geographi­cal spread they are not covered by the EU-ETS. Canadian oil and gas producer Encana asserts for example that it ‘does not have any production in the EU and does not currently envision becoming an active participant in any emissions trading scheme beyond that required to maintain compliance with any future Canadian GHG legislation.’

No incentive for voluntary scheme participation: Since firms always incur some costs by engaging in emis­sions trading, those that are not expecting to make a profit out of it do not seem to be willing to join a scheme voluntarily.

Reference: Pinkse, J. and Kolk, A., Multinational Corporations and Emissions Trading; European Management Journal (2007) doi:10.1016/j.emj.2007.07.03

Erisk Net, 27/9/2007

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